To Bid Or Not To Bid?To Bid Or Not To Bid?

The Risks and Rewards of The Risks and Rewards of Contractor Bids and Contractor Bids and

Proposals.Proposals.

Learning Objectives

Learn the Intricacies behind putting a Bid or Proposal together

Examine the Similarities and Differences between “Hard Bid”, “Design-Build”, and “CM at Risk”

Understand what Happens when your bid is “Too Low”

The Contractor’s BidThe Contractor’s Bid

How is an Estimate put togetherHow is an Estimate put together

What Decisions have to be made on What Decisions have to be made on Bid DayBid Day

How is a Proposal different from a BidHow is a Proposal different from a Bid

The EstimateThe EstimateAn ESTIMATE is the An ESTIMATE is the calculated approximation calculated approximation of a of a result which is usable even if the input data may be result which is usable even if the input data may be incompleteincomplete, , uncertainuncertain, or , or missing.missing.

What is an Estimate?What is an Estimate?

SWAGSWAG

Scientific Wild A _ _ GuessScientific Wild A _ _ Guess WAGWAG

Wild A _ _ GuessWild A _ _ Guess DAGDAG

Dumb A _ _ GuessDumb A _ _ Guess

OROR The estimator reads the designer’s The estimator reads the designer’s

mind and converts the drawing mind and converts the drawing symbols into measurements of symbols into measurements of materials and labor-hoursmaterials and labor-hours

Types of EstimatesTypes of Estimates

The Estimating ProcessThe Estimating Process

Deciding which project to BidDeciding which project to Bid Plans and SpecificationsPlans and Specifications Site VisitSite Visit Quantity Take-offQuantity Take-off PricingPricing Estimate SummaryEstimate Summary

Job Condition FactorsJob Condition Factors

Economic ClimateEconomic Climate LocationLocation Labor AvailabilityLabor Availability Material AvailabilityMaterial Availability Site AccessSite Access Material Storage AreaMaterial Storage Area Working ConditionsWorking Conditions

Job Condition Factors (cont.)Job Condition Factors (cont.)

Hoisting ConditionsHoisting Conditions Alternates and SpecialtiesAlternates and Specialties Subcontractor AvailabilitySubcontractor Availability General Contractor ManagementGeneral Contractor Management

The Repair & Remodel ChallengeThe Repair & Remodel ChallengeWhy is a repair / remodel estimate more difficult than an estimate for new Why is a repair / remodel estimate more difficult than an estimate for new

construction?construction?

Every Project is UniqueEvery Project is Unique As-built Drawings, if they exist are As-built Drawings, if they exist are

not always up to datenot always up to date Requires more Site VisitsRequires more Site Visits Existing Structures RestrictionsExisting Structures Restrictions Complete Plans and Specs are Complete Plans and Specs are

sometimes not availablesometimes not available Hidden ConditionsHidden Conditions

The Repair & Remodel Challenge The Repair & Remodel Challenge (cont.)(cont.)

Availability of Matching MaterialsAvailability of Matching Materials Access / EgressAccess / Egress SecuritySecurity Disruption to OccupantsDisruption to Occupants Code ComplianceCode Compliance Hazardous Materials AbatementHazardous Materials Abatement DisposalDisposal

Types of Costs in an EstimateTypes of Costs in an Estimate

Direct CostsDirect Costs

Job OverheadJob Overhead

Indirect CostsIndirect Costs

General Overhead for a ContractorGeneral Overhead for a Contractor

Direct CostsDirect Costs

MaterialsMaterials LaborLabor EquipmentEquipment Project (Job) OverheadProject (Job) Overhead

Job OverheadJob Overhead Architect / Engineer FeesArchitect / Engineer Fees On-site SupervisionOn-site Supervision Permits / FeesPermits / Fees Shop Drawings / SubmittalsShop Drawings / Submittals Testing / InspectionsTesting / Inspections Temporary UtilitiesTemporary Utilities Dust ProtectionDust Protection Barricades / FencingBarricades / Fencing Security / SafetySecurity / Safety Project SignsProject Signs Vehicles / HoistingVehicles / Hoisting DisposalDisposal

Field OfficeField Office On-Site Clerical / On-Site Clerical /

TimekeeperTimekeeper SurveyingSurveying Construction PhotosConstruction Photos QA / QCQA / QC Temporary ConstructionTemporary Construction ScaffoldingScaffolding Winter ProtectionWinter Protection Access RoadsAccess Roads Storage TrailersStorage Trailers CleanupCleanup PunchlistPunchlist

Indirect CostsIndirect Costs

General (Office) OverheadGeneral (Office) Overhead ProfitProfit

General OverheadGeneral Overhead Salaries (Executives, Project Managers, Estimators, Clerical Salaries (Executives, Project Managers, Estimators, Clerical

Staff)Staff) Fees (Legal, Accounting, Marketing)Fees (Legal, Accounting, Marketing) Office Rent (or Building Depreciation)Office Rent (or Building Depreciation) Utilities, TelephoneUtilities, Telephone TaxesTaxes Insurance, BondsInsurance, Bonds AdvertisingAdvertising Training, SeminarsTraining, Seminars Travel, EntertainmentTravel, Entertainment Submittals that were not acceptedSubmittals that were not accepted

Sources of Cost InformationSources of Cost Information

Your Own Current Cost Records Your Own Current Cost Records (Historical Data)(Historical Data)

Current Subcontractor QuotationsCurrent Subcontractor Quotations Current Vendor QuotationsCurrent Vendor Quotations Adjusted Figures from Previous Adjusted Figures from Previous

QuotesQuotes Unit Price / System Cost BooksUnit Price / System Cost Books

Bid Day!Bid Day!

The “War Room”

The Place where the Bid is put together, Strategies are Reviewed and Risks are Taken

“The General” – Head Estimator running the Estimate

“The Troops” – Assistant estimators and any available able-bodied persons

“The Clerk” – Assistant to “The General”

The Bid Day Process

“The General” sets up the Bid Day Tabulation Sheets and Runs the Estimate

Subcontractors and Suppliers typically fax or call in their Quotes up until Bid Submission Time

“The Troops” 1) gather up the Quotes (usually from multiple fax machines), 2)Sort the quotes by division of work, 3)Tabulate the quotes on the Tab sheets by division of work,

The Bid Day Process (cont.)

4) Review the Scope of Work stated on the Subcontractor and Supplier Quotes for Inclusions and “Exclusions” (this is the big one) and Adherence to the Project Specifications5) Call the Subs and Suppliers with any questions or concerns6) Determine the Lowest “Responsible” Bidder for each division of work7) Convey this Information to “The Clerk”

The Bid Day Process (cont.)

“The Clerk” Gathers together the information from “The Troops” and Presents it to “The General” in a Logical Fashion for Insertion into the Estimate

“The Clerk” may also be Responsible for putting together the Bid Submission Package (The Bid Submission Forms, Bid Bond, and Subcontractor List) and Submitting the Bid Package at the required Location by the required Time

Once all the Quotes have been entered into the Estimate it’s Time (if there’s any left) for Strategies and Risk Taking

LUNCH! – What’s That?

Some Typical Emotions on Bid Day

Frenzy Stress Exhaustion

The Different Processes

Hard Bid – Discussed above, The Owner Contracts with an A/E Team and Contractor separately

Design/Build – The Owner Contracts with an A/E and Contractor Team to Design and Build (hence the name) a project without resorting to a Hard Bid Process (typically done only in the private sector)

CM at Risk – The Owner Contracts with an A/E Team for the Project Design and Brings a Contractor into the Loop thru an RFP Process early in the Design Process to develop a Guaranteed Maximum Price (GMP)

What Happens if Your Bid is Too Low?

The First Reaction is to “Shoot the Messenger”

What Happens if Your Bid is Too Low?

Question? – Can You Build the Project without “Losing Your Shirt”?

If Yes – Proceed and Hope for the Best If No – What are the Options?

1) Withdraw Your Bid? (Prove a Bid Error)2) What about the Bid Bond?3) Get Creative during Project Buyout

What Happens if Your Bid is Too Low?

4) Lose Your Shirt and Move On

Contractor Risks & Rewards

The Risks

You Don’t Cover all the “Holes” in your Bid and WAG it

You Cover all the “Holes” but your bid is too low

You Cover all the “Holes” , Bids are close, you Win the Project, BUT, “It all goes South”

The Rewards

Everything Goes Right and You Make a Profit!

Not only do You make a Profit, Everyone goes Home Happy!